Glencore to unveil concessions to woo Xstrata investors

Glencore will unveil last-ditch concessions on Monday to persuade Xstrata
investors to back its revised £36bn bid for the miner, including retaining
its chairman Sir John Bond at the head of enlarged group.

Glencore chief executive Ivan Glasenberg has also offered compromises over the role of Mick Davis, his opposite number at Xstrata.

In an effort to placate a growing backlash from Xstrata shareholders over Friday’s aggressive reworking of the proposed “merger of equals”, Glencore chief executive Ivan Glasenberg has also offered compromises over the role of Mick Davis, his opposite number at Xstrata, and over the structure of the proposed deal.

Mr Glasenberg is now prepared to see Mr Davis remain as chief executive of the combined group for six months before passing him the reins – and potentially allow him to exit with a bigger pay-off than the £8m he would take under his existing contract. He would also be entitled to shares, currently worth about £28m, awarded under various incentive schemes.

In a further concession, Glencore is now proposing to keep the deal’s original legal structure, requiring approval from 75pc of shareholders, with the commodity trader unable to vote its own 34pc stake.

Mr Glasenberg’s rethink came after he split the miner’s shareholders this weekend with an offer that raised the terms – to 3.05 Glencore share instead of 2.8 – but added the sting that he would take the top job, effectively ousting Mr Davis.

Xstrata complained on Friday that the revised bid, at a premium of 17.6pc to the undisturbed price, was “significantly lower than would be expected in a takeover”.

Yesterday activist investor Knight Vinke, with 0.5pc of Xstrata shares, said it “wishes to confirm that it does not support the latest proposal submitted by Glencore for Xstrata” and let it be known that it was trying to rally other shareholders to the cause.

It said: “We continue to believe firmly that – given the more than threefold increase in earnings which some analysts believe will be generated by the current development pipeline at Xstrata over the next two years – the value of Xstrata is substantially more than Glencore is proposing today.”

Richard Buxton, Schroders’ head of UK equities, has already said he was “not particularly enthused” with Glencore’s revised offer. Schroders owns 0.5pc.

Their views were opposed by Standard Life, Xstrata’s tenth largest shareholder, which said it would move to oust the company’s board if it did not agree to Glencore’s latest offer.

David Cumming, Standard Life’s head of equities, said it was “ludicrous” that the board would block a bid in an effort to protect the remuneration packages of Mr Davis and his management team.

He warned that if the board did not have a change of heart by next week, he would call for an EGM and “get them all kicked out”. Standard Life owns 1.42pc of Xstrata and 0.81pc of Glencore.

Glencore’s revised bid on Friday came after former Prime Minister Tony Blair brokered an eleventh-hour deal at London’s Claridge’s with sovereign wealth fund Qatar Holdings, which owns 12pc of Xstrata and was holding out for a better deal.

Yesterday it emerged that Mr Blair, who brought Sheikh Hamad bin Jassim al-Thani – Qatar’s prime minister and chairman of Qatar Holding – and Mr Glasenberg to the table, got less than the reported $1m (£625,000) fees for his evening’s work. Sources close to the talks said Mr Blair was paid a more modest amount, closer to £150,000.

Mr Davis, who was in Switzerland, did not attend the meeting.

Glencore’s revised proposal values Xstrata’s share capital at £35.6bn. This means the commodities house is offering a £22.95bn-all-share deal to buy the group, taking into account its 34pc stake in Xstrata.